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Fundamental Analysis.
1. Its Earnings
Unadjusted ('000 mil, sen)
2008 = 2.594, 59.9
2009 = 0.917, 21.2
2010 = 3.202, 73.7
2011 = 0.499, 9.2 (with Bonus issue 1 for 4)
2012 = 4.197, 76.8
2013 = @ 1H earning is up 0.4%. Comparing to 1QFy13, it posted a little drop in Sales of electricity but not at worrying level.
Comment:
Looking back from 2013 point of view, 2011 was the best year to own a piece of Tenaga.
2011:
The main reason for its poor result in 2011 was due to several factor, Gas curtailment, higher utilization of coal at high price (average USD106.9 per tonne) and higher oil and distillate usage.
This is despite Tenaga getting Electricity Tariff revision (up 7.12%) starting June 2011 which resulted higher sales of electricity.
2013:
Tenaga said in its report that it is expected to incur higher generation costs with continued usage of alternative fuels to make up for the shortfall in gas and meeting higher demand.
Thus, its prospects for the year ending 31 August 2013 remain cautious. But so far it may match FY12 earnings.
2. Its Cash & Operating Cash.
Its operating cash also healthy. For 1H, it posted RM 3.655Bil operating cash. Its Cash balance is RM 7.589Bil.
Its cash has been growing from RM 5.383Bil in 2008 to RM 7.589Bil as per latest quarter. Up 40.9%.
3. Dividend
Its dividend payment has been quite consistent EXCEPT for FY11 whereby it declared only 4.5 sen dividend.
Otherwise its record are as per below;
Year: (sen) (Payout Ratio)
2008: 20 sen (33.4%)
2009: 16.3 sen (77.0%)
2010: 26 sen (35.3%)
2011: 4.5 sen (49.1%)
2012: 20.1 sen (26.2%)
For FY13, Tenaga has declared 10 sen dividend. The payout ratio is 20.5%.
Tenaga is paying out quite a healthy dose of dividend. For the past 5 years, it has never borrow to pay dividend. Good.
4. DEBT
Its borrowings reduced by about RM 2Bil, from RM 23.0Bil to RM 21.7Bil now. Reduce about 10%.
Its exposure on foreign currency debt is 1/3 (equivalent to RM 7.044Bil).
Conclusion
Valuation:
@ RM 8.29 with earning of 77.1sen (ttm),
Mr market price it at 10.75x PE. ROE is at a healty level of 12.6%.
Lets compare with regional Utilities. (Sorted by size. TENAGA is the biggest)
Manila Electric Company (Phil): PE=23.8x
Aboitiz Power Corp (Phil): PE=13.7x
Glow Energy (Thai): PE=13.6x
Ratchaburi Electricy (Thai): PE=13.5x
Except for Manila Electric Co., others are trading at an average of 13.6x PE.
So, in conclusion, we probably can see Tenaga traded at about 13.6x PE. This translate to a target price of RM 10.40 without discount.
However, if such gas curtailment issue raises again, we may never see Tenaga trade at such price.
Technical Analysis. (refer chart)
Right now I can see that its price is quite stretch. RM 7.60 remain as immediate support.
Next resistance is at RM 9.00 level which was the high in January 2007 before 2008-09 recession.
Stochastic is very much overbought.
RM 10.40 is within reach but NOT without a healthy correction. Inclusive of correction, we might see this target price in 12 mths time.
Of course, unless its earnings deteriorate, its target price would also be revise downwards.
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